Swimming with Asian Sharks - Business Secrets from the Pacific Rim

The Rule of 40/30/30

Whenever you do a project for pay, always ask for 40% upfront, 30% halfway, and 30% on final delivery.   If possible, ask for even more upfront.  I had a bad habit in my younger years as a contractor of not accepting payment until the project was fully completed.  I had this mistaken notion that I didn’t want the customer to pay unless the work was complete.  This was foolish on my part, as I soon learnt that what you believe is “complete” is not what the customer believes.  This rule saved me from doing a lot of work without getting paid in Hong Kong.

When I arrived back in Hong Kong, Mr. Princeton was really surprised to see me come back and even more surprised to see that I’d brought someone back with me.  Mr. Mineral and I were really determined; I was determined to make something happen for the next four months.  To do this, I knew we needed money.  I had started two contracts for LoyalPlus a few months earlier, One was for making them a mobile payment system that would allow them to track spending and both member and merchant points. The other was to create an ecommerce space very similar to WishWall.me. I had no intention of contracting for LoyalPlus, but when Mr. Princeton was working there as the GM, I reluctantly had contracted for LoyalPlus because I knew the bind he was in with his previous contractors dropping the ball.  I had spent the better part of my previous trip and most of my time back in Toronto working on the software, which was done to spec. I had come back expecting to collect on the mobile system contract, which was done in my mind, and to collect the middle 30% of the ecommerce site.

I returned to Hong Kong expecting to come back and collect almost thirty thousand Canadian dollars, an amount most people don’t make in a year.  Unfortunately, I discovered to my distress that they were unwilling to pay.  It turned out that during the time I was gone, the pool of money that the start-up had began to dry out, and they were desperately trying to find a round of additional funding.  I was devastated. This money was what I had used to convince my future wife that I needed to return to Asia. My contract with Mr. Mineral also relied on these funds being ready for me when I returned.  Finally, these funds were going to be used to fund my start-up ventures for the next four months.

Thankfully, the 40/30/30 rule had saved me; I already had 40% on both the first and second projects, and because I plan for the worst case, I had reserves to pay for Mr. Mineral’s contract with me.  LoyalPlus had to terminate the ecommerce project.  The funding for this project up to this point had come from my own pocket.  Luckily, I had planned for this scenario, and had a team from the Philippines build the project for the 40% I had collected upfront.  The only things lost were my time and energy spent planning and organizing the massive ecommerce site.

For the mobile payment system, I had protected myself by stating clearly in the contract that my company would have the right to take down the system if final payment was not made.  This is an extremely important clause to have if you plan on doing software.  It’s a good idea to engineer a way to disable a system in events such as deadbeat customers, which can be easily removed when payment is complete.  Another advantage I had was that Mr. Princeton was still able to influence the directors.  He helped me make it clear that if I were not paid in full, the system I had helped them build and deploy would be taken away.  As luck would have it, they managed to raise another round, and after about three and half months, I finally got paid.

The net effect was that I got my money, but the damage it did to my time, mental energy, and trust is something I would not want to happen again. This story illustrates that even if you have trust in a company, don’t ever forget to use the 40/30/30 rule.